It’s January 3, 2022  and this is the Watson Weekly - your essential eCommerce Digest!

Today on our show we’re going to do something a little bit different and review 2021’s top 5  stories, as seen by my LinkedIn feed.

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Number 5.  Supply Chain Crisis hits everyone hard.

Number 4.   Retail Stores strike back

Number 3.   Are Target and Walmart the New Malls?

Number 2.  Investors Look to Split Up Several Large Retailers

Number 1. Shopify Executive Departures Cause Concern at the Company

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Story Number 5.  Supply Chain Crisis hits everyone hard.

In 2020, the story was about a domestic shipping crisis.  This is caused by essentially too much small parcel eCommerce traffic in too compressed a period over the holiday season.  This caused a lot of people not being able to get their parcels on-time.

In response, Amazon has doubled its facility capacity, shipping companies like FedEx and UPS  have limited surge volume and pushed those parcels forward to future days, and the return of retail made the peak volumes slightly lower, particularly if you look at Cyber Monday which was down 1% from last year.

So the domestic shipping companies weathered the storm this year, except when it comes to labor and cost increases and inbound logistics.

While it was somewhat expected by many, the continued presence of COVID, widespread manufacturing outages, container and trucking shortages, port delays, worker retirements and shortages all caused a new kind of chaos in the supply chain this year.

In fact, we could deliver to the home, although companies like Amazon and FedEx did report higher chaos costs in Q3 due to labor shortages.

But what we really couldn’t do was actually get all the goods we ordered which came in on containers.  This caused supply shortages for many retailers.  The larger retailers did find workarounds in other ports, and in some cases using air freight - particularly for their highest margin or most in-demand items.

The root cause of many of these delays is COVID and worker conditions, which unfortunately I don’t see subsiding until at least the second half of next year.

Story Number 4.   Retail Stores strike back

If you just look at comparables to last year, it was obvious that retail had a good comeback year, and the Direct to Consumer narrative got a little bit muddier.

Retailers across the board snapped back almost to pre-pandemic growth levels with many retailers reporting 10-15% growth year on year and more retail growth than eCommerce growth.  In fact, eCommerce because of its tough comparable was flat a lot of places and up only 3% other places.

Apple’s iOS changes were actually tougher than many expected, and cut in half the advertising effectiveness of many brands I speak with.  This didn’t help eCommerce growth particularly for Facebook-dependent direct to consumer brands, which is most of them.

The real reason for these changes is that unlike last year, retail stores were not shut down for months on end, as the country has learned how to navigate the pandemic a little better.  I’m crossing my fingers that this continues.

Story Number 3.   Are Target and Walmart the New Malls?

One of the trends that really rose to the forefront this year is the big getting bigger, particularly Walmart and Target.  In fact, I noticed quite a numbe rof store closings in the last year that made a new home for themselves in Walmart and Target stores.

Disney - closing 60 stores, coming in 160 Target stores

Gap - introduced its home line into over a thousand Walmart stores.

Ulta - closed 19 stores, coming in 100 Target stores

Levi's adding an additional 350 Target stores

Justice closed 900 stores, opened in 2400 Walmarts

Apple opened in 17 new Target stores.

Why is this trend happening?  A few reasons I think.

1 - Wholesale is on the rise with the decreased effectiveness of Facebook and the increasing need for brands to get in front of consumers.

2 - Walmart and Target’s customer experience is unmatched from an omnichannel point of view.  It’s very convenient to shop there as far as pickup, same day delivery, curbside, and returns.

3 - It’s cheaper to leverage someone else’s store than to setup your own.

And finally, it’s where the customers are.  As people returned to stores this year after being closed due to COVID last year, they returned to the best stores first.  So brands are just following the foot traffic.

https://www.linkedin.com/feed/update/urn:li:activity:6843526009426460673/

OUR NEXT STORY Number Two. 

Investors Look to Split Up Several Large Retailers

I will tell you this.  If there is one topic I did not see coming into this year is investors looking to break up retail companies.

If you had told me that a large retail company CEO like Saks would publicly say, it’s better for us to split the company into Stores and eCommerce business units, I would have laughed you out of the room.

Yet here we are, talking about it not just for one company for 3 companies that are actively in stages of planning such breakups.

Of course it’s a bad idea for the consumer in the end, but what it does do is give a needed shot of investment that these firms need to continue to transform their digital experience which in many cases is still nothing to write home about, despite its growth and size.

That caused me to think about this trend a bit more.  Saks CEO Mark Metrick was defending the new plan in news outlets saying it will allow him not to have to chose.  But I think the news media has the narrative backwards that he would have wanted this anyway.

So what is the cause and what is the effect?  Ultimately, if I read between the lines, year after year Saks has presented both stores revitalization projects and eCommerce growth projects to the Board, only to have them continually rejected.  And since Saks doesn’t have limited money, it does not have as much to spend on eCommerce as some of its competitors.

Using this narrative, helps me frame it a little better and gets you off the narrative of yelling at the CEO.  Instead, the message is more about great corporate governance.

I’m struck recently by the CEO of Neiman Marcus, a privately held company who made a simple statement in the news saying “I don’t think that’s best for the consumer. “ and then the news story moved on.  Sorry, nothing to see here.

The real lesson for retailers and brands is corporate governance.  For many CEOs, your Board is your destiny.  Who is your Board made up of?  Are they investment oriented?  Or are they risk-averse?

It’s clear which investors some of these companies have - and if you are an older public company maybe you inherited this situation and can’t do anything about it.  However, there are some lessons here for every CEO and Board in how they nominate and pick members for Board seats.

Having the right people in the room matters.

AND FINALLY ….

The Number One Story On My LinkedIn Feed This Year.

Shopify Executive Departures Cause Concern at the Company

https://www.linkedin.com/feed/update/urn:li:activity:6788435354581012480/

We tend to forget these things, but earlier this year a large percentage of the Shopify Executive team departed for greener pastures.  One of my posts on this topic earlier this year actually generated 100,000 views which was my top engagement from the year.

The executive departures That included:

- Chief Technology Officer

- Chief Talent Officer

- Chief Legal Officer

- and last year, Chief Product Officer.

It’s interesting to look back and see which of them have been replaced.

And the answer is, only the Chief Technology Officer has been replaced.

I’m sure the Chief Talent Officer could easily be replaced by a VP level role so it wasn’t essential to backfill.  Same with Chief Legal Officer.

Only the Chief Technology Officer was actually replaced.  Allan Leinwand joined from Slack to Shopify at the end of October.

The Chief Product Officer is another matter entirely.  I think it’s widely understood the the real Shopify Chief Product Officer is Tobi.

Going forward, I don’t expect to see major changes here as the company moves forward..  

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That’s all for this week! Till next time Watsonians.....

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Hi, I’m Rick Watson, CEO and Founder of RMW Commerce Consulting and host of the Watson Weekly podcast - your essential eCommerce Digest.

Our show is produced by Citizen Racecar.  Alex Brower is the producer and also wrote our theme music. The Executive Producer is David Hoffman.

To hear new episodes of the show every Monday morning, subscribe now at rmwcommerce.com/watsonweekly and wherever you get your podcasts.